Investors press ahead for Madoff's personal assets

NEW YORK (Reuters) - In a move to ensure that all of jailed swindler Bernard Madoff's personal wealth is used to pay his defrauded customers, some investors filed court papers on Monday to force him into bankruptcy.

Their lawyers have argued that making Madoff bankrupt would make it easier for victims to recover any Madoff-linked assets that have been transferred to family members or third parties.

The next step will be another petition to the court for the appointment of a trustee to oversee the personal assets of Madoff, who pleaded guilty on March 12 to running a $65 billion fraud over 20 years, bilking thousands of customers from big banks to charities to small investors.

A trustee is already working to oversee the winding down and recovery of assets from Madoff's firm to distribute the proceeds to former customers.

Madoff and his outside accountant are the only people charged in the case, but U.S. prosecutors are investigating who else might have been involved in the biggest fraud in Wall Street history. Madoff is in jail pending sentencing in June.

Monday's filing in U.S. Bankruptcy Court in New York was made on behalf of five investors claiming $64 million, according to court papers. A federal judge last week opened the door for the petition by reversing his December ruling preventing any such legal action.

The U.S. Securities and Exchange Commission, U.S. prosecutors and the court-appointed trustee winding down the brokerage firm objected to the efforts of these investors.

They argued that it would lead to unnecessarily high administrative costs and confusion. The SEC said authorities already are working to ensure that proceeds of any Madoff assets they recover will be distributed to bilked customers.

A lawyer for the five investors said he wanted to try to make sure no assets slip through the process.

"The two trustees will sit down and work out a protocol," said the lawyer, Jonathan Landers. "We trust they will cooperate."

On March 17, U.S. prosecutors signaled their intent to ask for $31.5 million from loans to Madoff's sons and $2.6 million worth of his wife Ruth's jewelry. An earlier filing sought that Madoff and his wife forfeit more than $100 million worth of homes, cars, boats, securities and valuables, some of which have already been seized by U.S. authorities.

The cases are In Re: Bernard L. Madoff 09-11893 U.S. Bankruptcy Court for the Southern District of New York (Manhattan);

Securities and Exchange Commission v. Madoff et al 08-10791 in U.S. District Court for the Southern District of New York

(Reporting by Grant McCool, editing by Maureen Bavdek and Matthew Lewis)